Investing in crypto with borrowed money – can it pay off?

Ludvig
03.04.2022
36 Views
Invest in crypto with borrowed money

Surveys show that Norwegians are at the top of the world when it comes to debt that has grown so large that it has become difficult to handle.

A consumer loan is an unsecured loan that gives you money quickly, and this is a solution many people go for when they are in trouble. In fact, Norwegians have a consumer debt of a total of 4,000 billion. And there is no other way to describe it than to say that it is a wild sum.

Since the total debt is so large, one quickly realizes that it is not just about Norwegians who are in a general crisis. Some people probably also take out consumer loans in connection with an activity that they themselves have great faith in, such as investing in cryptocurrency .

Investing in crypto with borrowed money is a very interesting topic, so in this article we are going to take a closer look at this. Is there something someone actually does, how does it go and is it wise to do it? These are some of the questions we will answer below.

What is cryptocurrency?

Before we move on to the topic itself, which is investing in crypto with borrowed money, we will take a look at what cryptocurrency actually is. Many people probably think that it is a rather complicated thing.

But cryptocurrency is not really that complicated. On the other hand, we must not hide the fact that it is very time-consuming to get acquainted with it. But if you want to do something like cryptocurrency, then there is no way around it. At least not if you want to do it right from the beginning.

It is really quite simple to define the term cryptocurrency. For cryptocurrency is simply a digital currency that one can use to pay for oneself in various places online. As of today, cryptocurrency is perhaps most accepted as a means of payment in the casino industry.

The most important difference between cryptocurrency and our traditional currencies is simply that cryptocurrency is not money that we hold in our hands physically. It is only an inventory that we have access to through a digital wallet, ie a wallet that we do not see physically either.

Kryptovaluta for nybegynnere

Several reasons to engage in cryptocurrency

There can be various reasons for engaging in cryptocurrency. The reason will also define which method very many people use. Cryptocurrency can be divided into two main groups. We will take a closer look at them, as well as define each of the concepts. They are the following:

  • Investment: when you buy cryptocurrency and have a hope that it will lead to financial gain in the long run.
  • Trading: when you buy cryptocurrency without necessarily having plans to do so for a long time. Trading is often more short-term than an investment, and if you want to achieve a financial gain with this as a starting point, then it is something that will take time.
[trading]

As I said, there may be several reasons why someone wants to engage in cryptocurrency. For some, for example, it may be a long-term investment that they want to use for something big at a later date. This can be, for example, buying your own home or car.

There are also people who engage in cryptocurrency solely because it is fun, which of course is completely inside. It is up to each individual person to decide what is the reason why they are doing something, and this also applies in connection with cryptocurrency.

Cryptocurrency can thus be both a short-term and a long-term investment.

One can invest in crypto with borrowed money

We must not hide the fact that investing in cryptocurrency is both time-consuming and an expensive activity. And since crypto is really in the wind during the day , it is not inconceivable that many consider what opportunities they have to be able to operate with crypto.

Among these possibilities, there is probably a good chance that taking out a consumer loan or similar will come up as an alternative. But is it at all possible to invest in crypto with borrowed money?

In general, there is nothing to stop you from borrowing money with borrowed money. Therefore, there are probably many who both take advantage of the opportunity to take out a consumer loan or who borrow money from someone they know with a promise that the return will benefit them as well.

Giring allows you to trade with borrowed money

An alternative is to leverage cryptocurrency – a financial instrument that is popular in connection with equities.

See more in this video that shows you the basics of gearing:

[giring]

This is how you go about getting a consumer loan

Getting a consumer loan approved is a relatively simple affair. The reason for this is that the bank’s systems are becoming more and more automated, so it is not necessarily a “real” person who reviews your application, thinks that you are a good candidate and approves the application. Instead, it is a computer that takes care of this bit.

Consumer loans are something you can apply for digitally. It was not like that before, but we believe that it plays an important role as it is so simple in today’s modern society. The digital application must be filled in with a number of personal information about you and the situation you are in. Here are some examples of information that the application should contain:

  • Name and birth number.
  • Email and phone number.
  • Where do you live?
  • How much do you want to borrow?
  • Are there more people who will service the loan in question, or is it just you?
  • What position percentage do you have?
  • What do you have in annual salary (gross).
  • How much do you already have in debt (mortgages, student loans, car loans, etc.).
  • Do you have a credit card? If so, what is the total credit limit and how much of it have you used.
  • Do you want to refinance , or is this a standalone loan?

There are different types of consumer loans. You can choose between secured loans or unsecured loans. If you are in a predicament, then there are probably many who choose to go for the latter. In connection with the former, however, you must put something you own as security for the loan.

What separates a consumer loan from, for example, a home or car loan, is that the money you borrow is not earmarked. If you take out a mortgage, these are funds that are used exclusively to finance the purchase of a home. This is also how it works with a possible car loan. But with a consumer loan, you are not obliged to state what the money will be used for.

One should not invest in crypto with borrowed funds

But even if there is theoretically nothing in the way of investing in crypto with borrowed funds, it does not mean that it is something you should do. In fact, we would go so far as to dissuade you from doing so.

We fully understand that it can be tempting, but then it is important to remember that there is no guarantee that your investment will go well ( read more about this here ). Most cryptocurrencies are associated with high volatility, which means that the exchange rate fluctuates up and down like a yo-yo. In practice, this simply means that you could end up losing everything you invested.

Therefore, it would be an advantage to be a little wary of investing in crypto with borrowed funds (or any funds for that matter). A good rule of thumb is that you should never bet more money than you can actually afford to lose. So investing 100,000 kroner in cryptocurrency is probably not a good idea. Nor is it to borrow 100,000 kroner to do so.

Derfor kan trading være risikabelt

Think carefully about the matter

Before you decide to take out a consumer loan (or borrow money from someone you know) to invest in cryptocurrency, it is important that you think carefully about the matter.

Of course, you want such an activity to end as a pleasant experience, and then it is important that you look at it from a realistic perspective. And there is simply a lot that needs to be done for the activity to end up being just that.

In addition to thinking through the matter, you should spend plenty of time getting to grips with the topic as well. Then you will better understand what you are doing, which can help you make good decisions.

Costs and returns should match

A good example is that costs and returns should reflect each other. This is of course easier said than done, as it is more or less impossible to predict in advance, but one should at least make an attempt.

Costs (ie what you put in the investment) and return should match, and it is quite important for the investment to have something to offer in the long run.

In practice, it simply works so that you do not necessarily have to invest large sums to make good money by investing in cryptocurrency. On the contrary! You can invest a few hundred bucks and be left with several hundred thousand kroner. But this is no guarantee. The price can also suddenly go the other way during the period you decide to invest, and it is also important to take this into account.

Author Ludvig

Ludvig har lang erfaring med kjøp og salg av kryptovaluta. De senere årene har han tatt det til et nytt nivå og prøver å leve av kryptovaluta trading. Han følger godt med på markedet og har opparbeidet seg god kompetanse på teknisk analyse mm. Vi er veldig glad for å ha Ludvig med på laget, og er det noe du lurer på angående kryptovaluta er dette mannen du spør!